Countertop Demand: Still Growing, But Slower

   Advances will be driven by modest growth in kitchen and bath remodeling expenditures, which are forecast to continue to outpace other housing improvement expenditures. Additionally, there is an ongoing trend toward larger kitchens and more bathrooms, with less square footage allotted to formal living rooms and dining rooms.
   Although the new multiple-unit and manufactured-housing markets are forecast to rebound through 2009, countertop sales will be limited by declines in new single-unit housing completions – a much larger market for new countertops.
   In value terms, demand for countertops is expected to reach $12.7 billion in 2009. Value gains will be promoted by the growing market penetration of high-value countertop material types such as solid surface, natural stone and engineered stone.
   However, fierce competition among materials suppliers and countertop fabricators will exert downward pricing pressure on each of these materials over the next decade.
   Countertops made from engineered stone and natural stone will experience the strongest gains, in both value and volume terms, through 2009. Demand for natural stone will be aided by consumer interest in the luxury and style that most stones offer. Demand for engineered stone will benefit from its ability to combine the minimal porosity of solid surface with the heat and scratch resistance of quartz.
  
NATURAL STONE
   Demand for natural-stone countertops is expected to increase 2.8 percent per year to $2.6 billion in 2009. This projected growth rate is the second-strongest among all countertop materials, and is well above the average for the total countertop industry.
   However, this rate also represents a marked deceleration from the gains posted from 1999 to 2004, as prices continue to fall as a result of factors such as greater access to a larger number of granite quarries and a higher level of automation among countertop fabricators. Prices are also impacted by the increasing competition among a growing number of stone countertop fabricators, including low cost prefabricated suppliers based in Asia and other areas outside the United States.
   Going forward, advances will be driven by ongoing gains in market share in volume terms. Additionally, gains will benefit from consumer interest in natural materials, particularly higher-end stones such as granite that are less-porous and require less-frequent sealing.
   However, further growth will be restrained by the popularity of lower-priced varieties of stone, including lower-value grades of granite, as well as competition from products such as engineered stone, which offer the look and feel of natural stone with fewer maintenance requirements. Additionally, competition from higher-end laminates and solid-surface materials that are designed to imitate the look of natural stone will also impact demand somewhat, although to a lesser degree.
   In volume terms, demand for natural-stone countertops is projected to advance 5.6 percent annually through 2009 to 41.1 million ft². This rate, although a deceleration from the previous period, is still well above the industry average. In fact, it is the second-strongest growth rate among the different countertop materials.
   Volume gains will be driven by consumer style preferences, as a large number of consumers continue to upgrade to higher-end and natural countertop materials such as stone when remodeling. The appearance of stone, as well as certain performance advantages unique to the various stones, draws some consumers away from man-made materials. Additionally, natural stone is increasingly being used as parts of countertops (such as countertops on islands or in heat-sensitive areas near stoves) by consumers who would otherwise not consider a stone countertop because of the high cost.
   Further gains will be restrained by the projected decline in the number of new single unit homes completed through 2009, as well as a deceleration in kitchen and bath remodeling expenditures. Additionally, the high cost of many types of stone countertops and the substantial maintenance requirements for more-porous stones will inhibit volume gains somewhat.
   A wide variety of natural stones are used to manufacture countertops. Granite accounted for about 90 percent of natural-stone countertop sales by both value and volume in 2004. Other types of stones used in countertops include marble, limestone, slate, soapstone, lavastone, bluestone and travertine.
   In terms of volume, sales of granite countertops are expected to post average annual gains just below those projected for sales of other types of stone countertops through 2009. These other types of stone countertops are also projected to post stronger sales in value terms as the more-specialized nature of these countertops has limited competition from other fabricators and suppliers, thus creating a better pricing environment.
   Additionally, as granite gains a larger market share, many high-end consumers have begun looking for more-exotic stones to use as countertops as a way to create a more unique look that other consumers wouldn’t be able to afford. The stronger growth rates are also a reflection of the much-smaller base for these other countertops.
  
ENGINEERED STONE
   Demand for engineered-stone countertops, also known as natural-quartz surfacing, is expected to advance 6.7 percent per year to $2.1 billion in 2009. Gains will be driven by consumer interest in a high-end, nonporous surface with a natural-stone look, lower maintenance requirements and a high level of durability.
   Additionally, engineered-stone countertops are increasingly available in a variety of higher value versions, featuring semiprecious stones or a specialty surface texture.
   Further value advances will be restrained by declining prices, a trend which is accompanying the increasing number of competitors in the U.S. market. However, this trend is likely to be offset somewhat by greater volume growth, stemming from the price cuts and an increasingly accessible supply of the product.
   Various types of engineered stone are priced to compete with the various grades of other high-end countertops. For the U.S. market, this composite material is designed to fit a niche between solid-surfacing and high-end natural stone surfaces. In general, sales of engineered-stone countertops are targeted at consumers who want a harder, more-durable product than solid-surface countertops, featuring the look and sparkle of granite without the maintenance requirements or color limitations of the natural-stone surfaces.
    In volume terms, demand for engineered stone is projected to increase faster at a rate of 8.6 percent annually through 2009 to 38.3 million ft². Gains will benefit from ongoing improvements in market penetration, with improved distribution and sales networks, greater consumer awareness, and an increasing production capacity.
   Since its introduction, sales of engineered-stone countertops have been restrained by factors that are typical for a new product in the market. Going forward, growth will continue to be somewhat restrained by the relatively high price of engineered stone, which will likely limit its use in the new construction market, which is more cost-conscious than the renovation market.
   Volume demand will also be impacted somewhat by competition from natural stone and conventional solid surface. Further gains will also be limited by the decline in new single-unit housing completions through 2009.
   The Freedonia Group is a leading international business research company, founded in 1985, that publishes more than 100 industry research studies annually. For more information, call (440) 684-9600.

This article first appeared in the January 2006 print edition of Stone Business.